NZ capital spend shifted to health, education from transport

Finance Minister Grant Robertson’s $41.8 billion capital spending programme will divert transport funds into health and education – two areas the government has deemed to be woefully underfunded.

Today’s budget affirms the level of capital expenditure over the next four years, trimming $300 million of funding from the New Zealand Transport Agency, while adding another $900 million for district health boards and $300 million for education. NZTA spending is still the biggest at $6.4 billion over the forecast horizon, although the new government’s reticence for building roads has seen it back other modes of transport, while education has $4.3 billion set aside for it.

DHBs have $1.4 billion earmarked for capital spending, compared to just $600 million in the half-year update, which Robertson described as the “biggest capital injection in health in at least the last decade”. That includes $750 million of new capital to deal with the most urgent problems and a $100 million backstop to cover operating deficits.

“Our public services have been underfunded for too long and there has been a failure to appropriately plan for the future. That changes today,” Robertson said in a statement. “The coalition government is rebuilding the critical services Kiwis expect their government to provide – modern hospitals, classrooms kids can learn in, public housing for those for those who need it, efficient transport systems, and safe communities.”

The new spending track has pushed out some investments, with the June 2021 financial year expected to see the most activity, a year later than the previous forecast. The government’s flagship KiwBuild programme will also see spending delayed, with $1 billion of the $1.9 billion forecast expected to fall in 2021, reflecting construction sector constraints.

Robertson said capital spending can be lumpy, and there “maybe further rephrasing of these allowances”.

The capital spending programme doubles advances to Crown Infrastructure Partners to $1.2 billion, and Robertson said the government will use the balance sheets of entities such as CIP to help fund the KiwiBuild programme. Housing New Zealand will be able to borrow up to $2.9 billion from third parties and invest $900 million from its own operations to increase public housing by 6,400 houses over the next four years.

Other beneficiaries of the planned capital spend include the prison system, with $198.4 million set aside to accommodate an extra 600 prisoners in rapid-build modular units by the end of next year. Decisions on a $1 billion rebuilding of the outdated Waikeria prison have yet to be made.

Defence has $3 billion earmarked for capital spending over the next four years, including an extra $42.3 million in today’s budget under the Defence Estate Regeneration Programme. Replacement of its P3-Orion fleet of surveillance aircraft is flagged as a new fiscal risk.

Another $298.5 million has been set aside for the Canterbury rebuild, which will help fund the completion of the city’s Metro Sports Facility and financing new uses of the residential ‘red zone’. Christchurch City Council will be able to apply for capital from that fund to complete projects beyond existing arrangements with the Crown.

The budget also includes $100 million for the government’s supply partner, the Green Party, to set up a Green Investment Fund to encourage private sector investment in low-carbon industries. Detailed policy work on the fund has only just begun.

The Provincial Growth Fund has $316 million allocated to capital spending of its annual $1 billion available total funds.

Capital allowances are expected to add another $6 billion of spending through the forecast period and another $6 billion beyond.